Agora – Lockdown Threatens to Wipe Out Profits, Dividends
We revise our outlook on Agora to account for the negative impact of the coronavirus epidemic on the Company's earnings prospects. Our current base-case scenario assumes that Agora will generate an EBITDA loss of PLN 23m in FY2020 after experiencing a plunge in revenues from the cinema business, combined with falling revenues from advertising. When it comes to the balance-sheet position, Agora is on stable footing with FY2019 year-end net debt of PLN 157m, net fixed assets of PLN 460m, and a 40% stake in Eurozet. The Company is planning to cut operating expenses in 2020, and it has slashed its initial CAPEX budget for the year – measures which should save it from having to raise external capital. Nevertheless we do not see AGO as a compelling bet with no dividends likely to be paid this year or next, and with negative FCF expected in 2020, followed by only a small rebound to PLN 13m in 2021. The coronavirus epidemic has resulted in an unpredictable and volatile operating conditions for Agora's advertising business, with highly uncertain medium-term prospects. After updating our models, we set our new target price for AGO at PLN 8.60, implying 11% upside potential. That said, given how rapidly the global situation is developing, valuations are subject to uncertainty.
Agora principally produces and sells newspapers and carries out the Internet activity. Co. is also engaged in the cinema segment through its subsidiaries, Helios S.A. and Next Film Sp. z o.o., and in the outdoor segment through its subsidiary, AMS S.A. Co. controls radio broadcasting companies and is a publisher in magazines, periodicals and books segment. Moreover, Co. and its subsidiaries provide printing services for external clients in printing houses belonging to Co. and its subsidiary, Agora Poligrafia Sp.z o.o. Co. is also engaged in TV segment by holding shares in Stopklatka S.A. Co. and its subsidiaries also engage in projects related to production and coproduction of movies.
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